Question 1

In recent years,economists have come to rely more on the establishment survey rather than the household survey to analyze current labor market statistics.

Accepted Answer

A) True 
 B)False

Question 2

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

Accepted Answer

A) one-half to one percentage point. 
B) one to two percentage points. 
C) one quarter percentage point. 
D) one and one-half percentage points. 
A) one-half to one percentage point. 
B) one to two percentage points. 
C) one quarter percentage point. 
D) one and one-half percentage points.

Question 3

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.

Accepted Answer

A) True 
 B)False

Question 4

The natural rate of unemployment is made up of

Accepted Answer

A) frictional,cyclical,and structural unemployment. 
B) frictional and cyclical unemployment. 
C) cyclical and structural unemployment. 
D) frictional and structural unemployment. 
E) seasonal and structural unemployment. 
A) frictional,cyclical,and structural unemployment. 
B) frictional and cyclical unemployment. 
C) cyclical and structural unemployment. 
D) frictional and structural unemployment. 
E) seasonal and structural unemployment.

Question 5

Table 20-18
 $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Nominal Average Hourly } \
\text { Earnings }
\end{array} & \begin{array} { c } 
\text { CPI } \
( \mathbf { 1 9 8 2 - 1 9 8 4 } = \mathbf { 1 0 0 } )
\end{array} \
\hline 2014 & \$ 10 & 100 \
\hline 2015 & 10 & 105 \
\hline 2016 & 12 & 117 \
\hline
\end{array}$$
-Refer to Table 20-18.Looking at the table above,what is the rate of growth of real average hourly earnings from 2015 to 2016?

Accepted Answer

A) 7.8% 
B) 6.25% 
C) 4% 
D) -4% 
A) 7.8% 
B) 6.25% 
C) 4% 
D) -4%

Question 6

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions.As a result we would expect

Accepted Answer

A) the labor force participation rate to fall. 
B) the unemployment rate to fall. 
C) the unemployment rate to rise. 
D) no change in the unemployment rate or labor force participation rate. 
A) the labor force participation rate to fall. 
B) the unemployment rate to fall. 
C) the unemployment rate to rise. 
D) no change in the unemployment rate or labor force participation rate.

Question 8

Table 20-14
 $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Nominal Average } \
\text { Hourly Earnings }
\end{array} & \begin{array} { c } 
\text { CPI (1982-1984= } \
\mathbf { 1 0 0 } )
\end{array} \
\hline 1965 & \$ 2.65 & 32 \
\hline 2010 & 22.59 & 219 \
\hline
\end{array}$$ The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14.The real average hourly earnings for 1965 in 2010 dollars equal

Accepted Answer

A) $3.87. 
B) $5.80. 
C) $12.10. 
D) $18.14. 
A) $3.87. 
B) $5.80. 
C) $12.10. 
D) $18.14.

Question 9

If the number employed is 190 million,the number unemployed is 10 million,and the working-age population is 250 million,then the labor force participation rate is

Accepted Answer

A) 4%. 
B) 5.2%. 
C) 60%. 
D) 76%. 
E) 80%. 
A) 4%. 
B) 5.2%. 
C) 60%. 
D) 76%. 
E) 80%.

Question 10

If cyclical unemployment is eliminated in the economy,then

Accepted Answer

A) the economy is considered to be at full employment. 
B) the unemployment rate is below the natural rate of unemployment. 
C) the unemployment rate is above the natural rate of unemployment. 
D) the economy is at less than full employment. 
A) the economy is considered to be at full employment. 
B) the unemployment rate is below the natural rate of unemployment. 
C) the unemployment rate is above the natural rate of unemployment. 
D) the economy is at less than full employment.

Question 11

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index.Which of the following is not one of the steps taken to reduce the bias?

Accepted Answer

A) using statistical methods to reduce the size of the quality bias 
B) updating the market basket every two years,rather than every 10 years 
C) incorporating substitutions by consumers when prices of specific products rise rapidly 
D) conducting a point-of-purchase survey to track where consumers actually make their purchases 
A) using statistical methods to reduce the size of the quality bias 
B) updating the market basket every two years,rather than every 10 years 
C) incorporating substitutions by consumers when prices of specific products rise rapidly 
D) conducting a point-of-purchase survey to track where consumers actually make their purchases

Question 12

What are menu costs?

Accepted Answer

A) the full list of a firm's costs of production 
B) the costs to a firm of changing prices 
C) the cost to a household of borrowing money when there is deflation 
D) the opportunity cost of dining in a restaurant instead of at home 
A) the full list of a firm's costs of production 
B) the costs to a firm of changing prices 
C) the cost to a household of borrowing money when there is deflation 
D) the opportunity cost of dining in a restaurant instead of at home

Question 13

Fill in the missing values in the table of data collected in the household survey for December,1996.The working-age population,employment,unemployment,and labor force are measured in thousands.Show your work.
 $$\begin{array} { | l | c | } 
\hline \text { Working-age population } & \
\hline \text { Employment } & \
\hline \text { Unemployment } & \
\hline \text { Unemployment rate } & 5.4 \% \
\hline \text { Labor force } & 135,113 \
\hline \text { Labor force participation rate } & 67.0 \% \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | c | } 
\hline \t

Question 14

According to the text,economists consider full employment to occur when

Accepted Answer

A) everyone who wants a job has a job. 
B) frictional unemployment equals zero. 
C) the sum of frictional unemployment and structural unemployment equals zero. 
D) the unemployment rate consists of only frictional and structural unemployment. 
A) everyone who wants a job has a job. 
B) frictional unemployment equals zero. 
C) the sum of frictional unemployment and structural unemployment equals zero. 
D) the unemployment rate consists of only frictional and structural unemployment.

Question 15

In the United States,the typical person who has lost his or her job finds another one in a few months except during severe recessions.

Accepted Answer

A) True 
 B)False

Question 16

You agree to lend $1,000 for one year at a nominal interest rate of 10%.You anticipate that inflation will be 4% over that year.If inflation is instead 3% over that year,which of the following is true?

Accepted Answer

A) The real interest rate you earn on your money is lower than you expected. 
B) The purchasing power of the money that will be repaid to you will be lower than you expected. 
C) The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation. 
D) The real interest rate you earn on your money will be negative. 
A) The real interest rate you earn on your money is lower than you expected. 
B) The purchasing power of the money that will be repaid to you will be lower than you expected. 
C) The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation. 
D) The real interest rate you earn on your money will be negative.

Question 17

Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan.How would a variable-interest-rate loan (one that adjusts over the contract period)eliminate these loses?

Accepted Answer

Lenders require compensation for inflati

Question 18

Which of the following would increase the unemployment rate?

Accepted Answer

A) a law making it illegal to work more than 35 hours per week 
B) a cut in unemployment compensation 
C) an increase in unemployment insurance payments 
D) a decrease in the minimum wage 
A) a law making it illegal to work more than 35 hours per week 
B) a cut in unemployment compensation 
C) an increase in unemployment insurance payments 
D) a decrease in the minimum wage

Question 19

An advantage of the household survey over the establishment survey of the labor market is that the household survey

Accepted Answer

A) is based on actual payrolls,rather than on unverified answers. 
B) includes the number of self-employed persons. 
C) includes the number of discouraged workers. 
D) omits persons employed at newly opened firms. 
A) is based on actual payrolls,rather than on unverified answers. 
B) includes the number of self-employed persons. 
C) includes the number of discouraged workers. 
D) omits persons employed at newly opened firms.

Question 20

Table 20-12
 $$\begin{array} { | l | c | c | c | c | } 
\hline \text { Product } & \text { Quantity } & \begin{array} { c } 
\text { Base Year } \
\text { Price (2001) }
\end{array} & \text { Price (2015) } & \text { Price (2016) } \
\hline \text { Burritos } & 10 & \$ 1.00 & \$ 1.50 & \$ 1.75 \
\hline \text { Flashlights } & 15 & 5.00 & 7.00 & 6.75 \
\hline \text { Golf balls } & 8 & 2.00 & 3.00 & 3.50 \
\hline
\end{array}$$
-Refer to Table 20-12.Consider a simple economy that produces only three products: burritos,flashlights,and golf balls.Use the information in the table to calculate the inflation rate for 2016,as measured by the consumer price index.

Accepted Answer

Total expenditures for 2001 = (10 × $1.0

Exam 20: Unemployment and Inflation

In recent years,economists have come to rely more on the establishment survey rather than the household survey to analyze current labor market statistics.

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.

The natural rate of unemployment is made up of

Table 20-18 Year Nominal Average Hourly Earnings CPI (=) 2014 \ 10 100 2015 10 105 2016 12 117 -Refer to Table 20-18.Looking at the table above,what is the rate of growth of real average hourly earnings from 2015 to 2016?

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions.As a result we would expect

If the number employed is 190 million,the number unemployed is 10 million,and the working-age population is 250 million,then the labor force participation rate is

If cyclical unemployment is eliminated in the economy,then

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index.Which of the following is not one of the steps taken to reduce the bias?

What are menu costs?

According to the text,economists consider full employment to occur when

In the United States,the typical person who has lost his or her job finds another one in a few months except during severe recessions.

You agree to lend $1,000 for one year at a nominal interest rate of 10%.You anticipate that inflation will be 4% over that year.If inflation is instead 3% over that year,which of the following is true?

Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan.How would a variable-interest-rate loan (one that adjusts over the contract period)eliminate these loses?

Which of the following would increase the unemployment rate?

An advantage of the household survey over the establishment survey of the labor market is that the household survey

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Where Prices Come From: the Interaction of Demand and Supply

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Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

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